Surplus Transfers from British Colonial Malaya

Martin Khor’s 1983 book on Malaysian economic dependence provided the first comprehensive estimates of the ‘colonial surplus’ from British Malaya. Khor described how Great Britain secured this from the colonial Malayan economy and estimated various types of surplus extracted via different means. Unsurprisingly, super-profits for privileged foreign capital owners are well known. The terms of trade have been important determinants of the colonial trade surplus. Financial surpluses are distinguished by those secured through the colonial currency board system, foreign commercial banks and colonial public finances, involving fiscal policy. The wealthy Malayan colony transferred funds to London at very low interest rates, but borrowed from British banks at exorbitant rates, besides paying high transactions charges. Colonial managerial privilege was also significant. Such surplus transfers were enabled by various colonial arrangements. Thus, colonial Malaya lost significant financial resources. Only some have changed in the post-colonial era, sometimes rather slowly. JEL Codes: B27, N15